Public sector pensions add to pay boost

GENEROUS public sector pension packages have seen government workers’ total pay rise much faster than their private sector counterparts, a leading think-tank has said in a study published today.

The Institute for Fiscal Studies (IFS) found that public sector workers saw their total remuneration improve by 10 per cent in real terms compared to just 5.3 per cent for their private sector counterparts between 2001 and 2005 when employer-provided pensions were taken into account.

These figures suggest that the growth in state sector compensation was even faster than previously thought, adding to fears that the private sector has fallen behind during the Labour years.

Better pensions was combined with faster earnings growth to lead to an even greater increase in public sector remuneration relative to that of the private sector than simply looking at current earnings would suggest.

Indeed, had the government instigated the recent rise in the normal pension age to 65 from 60 between 2001 and 2005 and applied it to all members of these schemes, “this would have almost entirely offset the faster growth in public sector earnings relative to private sector earnings seen over this period,” said Gemma Tetlow, senior research economist at the IFS.

Neil Carberry, head of pensions policy at the Confederation of British Industry (CBI), said: “The old assumption that more generous public sector pensions make up for poor pay is now defunct.” “Public sector pensions should be on a par with good private schemes,” he adds.